Diesels are Dead–Long Live Electric Cars

By Paul Gipe

By now everyone knows the story. VW defrauded US customers and violated the law by designing their diesel engines to “defeat” emission controls. Worse, while VW boasted about their “clean diesels” to their customers and to their competition, they did the bare minimum to meet Clean Air regulations in California.

Unlike Nissan and BMW, which built special-purpose factories for assembling electric cars, VW rolled out a “compliance car” instead. These are cars adapted from the manufacturer’s conventional line to run on electricity instead of gasoline. They simply take out the engine and gas tank and replace them with a motor and traction batteries. It’s the cheap way—the least they could do—to comply with California’s Clean Air mandates that requires them to sell only a few thousand cars per year.

For comparison, Nissan has sold nearly 90,000 all-electric Leafs in the US to VW’s paltry 3,000 e-Golfs. Nissan’s assembly plant in Tennessee is capable of 150,000 electric cars per year. That’s a multi-billion dollar commitment by Nissan. VW, on the other hand, invested in lines of software code to trick emissions tests.

The scandal has laid bare the claim that clean diesels for light-duty vehicles—passenger cars—can be built cheaply. They can’t. While clean diesels are technically feasible, it’s cumbersome and costly to do so. That’s why you only see them in big SUVs. Of course, one reason you see them in SUVs—light-duty trucks—is that SUVs don’t have to meet as stringent emission requirements as passenger vehicles. Why, because manufacturers have successfully lobbied for lower standards.

Thus, diesels are effectively dead for anything but luxury vehicles–of which SUVs are but one segment. The scandal may also signal something much greater, the beginning of a death spiral for conventional auto companies.

VW, like the Big Three, resisted the move to Electric Vehicles (EVs). It wasn’t until Tesla, a Silicon-Valley upstart, began encroaching on their turf that they began to pay attention.

They should be very worried. Some analysts are suggesting that EVs offer an existential threat to the auto industry’s business as usual similar to what solar and wind energy have done to electric utilities. EVs are a potentially “disruptive” technology that allows new players to enter a market once dominated by the likes of the Big Three (think Tesla) or smaller, innovative companies to take market share away from their larger competitors as Nissan is doing.

The VW fraud is just the tip of the iceberg—and not the first time VW has been hauled before regulators for using defeat devices. Previously, GM’s Cadillac division reached a settlement with EPA on nearly one-half million cars. Ford and Honda have also been caught. Then there’s the $1 billion settlement with truck manufacturers for using defeat devices on—yes, diesel engines.

What these cases illustrate is that manufacturers have driven internal-combustion engines head-long into the law of diminishing returns. They’ve made the big reductions in emissions, and it wasn’t enough to clear the air. The engines must be cleaner still and they can’t do it cheaply or maintain performance–without cheating.

To survive, incumbent manufacturers have to retool—and they have to do it now. This could be the silver lining in the VW scandal. It could be the shock necessary to get VW—and the industry—moving towards truly clean cars.

What can VW do? The can come clean. They can agree to regulators’ demands without endless litigation. They can pay their fines. They can change the way they do business.

What should regulators demand? Hefty fines, of course, not the slap on the corporate wrist that has been accepted by EPA and CARB in the past. But regulators should go much further. VW’s fraud is extraordinary even by the standards of the auto industry. Regulators should prohibit VW from selling any more cars unless they can prove that the cars are truly clean—that is, without any emissions at the tailpipe. The only way VW can do that today is by building EVs. If EPA won’t demand it for the nation, CARB should demand it for California.

Regulators could also order VW to install tens of thousands of fast charging stations across the breadth of the country. These are stations that are capable of charging EVs in a matter of minutes–not hours.

Current consumer-oriented EVs, such as the Nissan Leaf, have limited range (60 to 80 miles). It’s enough for all but the occasional big out of town trip. That’s when you need a network of fast charging stations. Tesla figured this out. They have a nationwide network of fast chargers that allows a Tesla owner to drive coast-to-coast on electricity. Unfortunately, only the wealthy can afford a Tesla.

California is poorly served by fast-chargers in inter-city travel. There’s only one fast charger in Bakersfield, and it seldom works. The next closest is in Visalia! Rapid build-out of fast chargers on California’s major travel corridors, such as I-5, Hwy. 99, and Hwy 58 for example, would allow drivers to use current EVs just like they use today’s “gassers” or gasoline-powered cars.

Nissan and BMW have proven that you can build successful EVs—and more importantly to the auto companies—that you can sell them. The adoption of electric vehicles is growing at a faster rate than the adoption of Toyota’s Prius when it was introduced a decade ago.

Within a year or two, manufacturers will offer the second generation of EVs. These will have dramatically improved range for about the same cost. Sales are expected to skyrocket.

Environmentalists should insist that regulators force VW–willingly or unwillingly–to abandon the internal-combustion engine and switch to EVs now for our sake as well as for the future of VW. It’s the only way to clear the stench of VW’s fraud, while clearing the air that we breathe.